Vie Agreements

(v) the capital agreement between WFOE, prC and the national company, whereby the PR persons pledged their interests in the national company in the WFOE as a guarantee of the performance of their obligations and the obligations of the national company arising from other agreements between the three (3) parties to the LIFE structure; and operations. Dangdang`s registration statement does not contain details on how this will work, but there are some clues. The objective of each LIFE structure will be to minimize gains in LIFE. The remaining gains in the LIFE are problematic because the final transfer of these profits to public shareholders is difficult and costly. While life agreements generally require VIE shareholders to pay dividends to the limited company, all distributions to LIFE shareholders in China would be subject to an individual income tax, which is superimposed on corporate taxes already paid. The essence of the LIFE model lies in the fact that, despite the absence of a capital relationship between the listed company and the business company, the publicly traded company and the commercial enterprise it effectively controls can be consolidated because of the series of agreements between them. Because the LIFE model comes from Sina, it is also known as the „Sina model.“ Examples of agreements granting effective control over LIFE: appeal option agreements, voting rights or agents, loan contracts. Both the People`s Superior Court of Hainan Province and the Supreme People`s Court ruled that the Framework Agreement on Cooperation was legitimate and valid in this case and reaffirmed that the foreign investment management catalogue in industry and the provisions of the Ministry of Commerce relating to the implementation of security checks for the acquisition of domestic enterprises at ministerial level were rules and rules at ministerial level and therefore could not be used as a based on determining the validity of a contract. However, the courts found that the relevant VIE agreements did not fall within the scope of the review of the case and did not comment on the validity of the VIE agreements. Capital agreement.

The founders entered into a share concession agreement with Dangdang Information, which mortgaged its shares in Dangdang Kewen as collateral under the loan agreement and other agreements. From a legal point of view, the LIFE model is essentially about controlling a company through agreements and not through capital control. Given that the origin of the application of the LIFE model in China is indeed the desire to circumvent restrictions on foreign investment in certain industrial sectors, this is in itself a mistake. On the one hand, a LIFE agreement carries the legal risk of being considered a null and void agreement, with the potential to be considered a legal form for an illicit purpose, to harm the public interest or to violate mandatory laws or administrative provisions. This also greatly increases the controller`s actual exposure to the moral star. On the other hand, public authorities can strengthen the supervision of operators` operating licences (cancellation of administrative authorizations or increased conditions for verification of these administrative authorizations) and, therefore, materially deny the LIFE model directly from the company`s point of view. In January 2015, the Ministry of Commerce published the Foreign Investment Act of the People`s Republic of China (Draft Comments) („Project Comments 2015“). In the 2015 draft opinion, THE VIE Structure was clearly recognized as a kind of foreign investment and was therefore included in the regulation of foreign investment. Article 15 provided that foreign investors who controlled or held rights to a domestic company through contracts, trusts or other methods are considered foreign investments and are subject to the provisions relating to first entry, security investigation and disclosure in the Foreign Investment Law.